Franklin v. Lexington Ins. Co., No. WD 84816, 2022 WL 2310031

(Mo. Ct. App. June 28, 2022)

The Missouri Court of Appeals has held that depreciation, without a specific provision in the policy stating otherwise, was limited to physical deterioration, and therefore the insurer was precluded from depreciating labor costs when calculating actual cash value (ACV). A storm damaged the roof of the insured’s property leading to water intrusion. The insurer depreciated labor when calculating the ACV of the loss. The court looked to other jurisdictions and found that they have reached differing conclusions on the issue. The appeals court found that the policy language pertaining to the calculation of ACV was ambiguous, and thus the policy must be interpreted in favor of the insured. Consequently, the insurer was not permitted to depreciate labor costs when calculating actual cash value.